dailyloe.com – Walmart Inc. continues to experience margin pressures due to an unfavorable sales mix. The company’s stronger growth in grocery and health-related categories is offsetting gains from higher-margin discretionary businesses.
In the fourth-quarter fiscal 2026, Walmart’s consolidated gross profit rate increased by 13 basis points to 24%. This improvement was supported by strong inventory management and a better business mix, though the merchandise category mix partially offset these gains.
Walmart U.S. saw grocery comparable sales rise in the mid-single digits, while health and wellness comparisons grew in the high single digits. In contrast, general merchandise only delivered low single-digit growth, indicating that lower-margin grocery and pharmacy categories are impacting overall margins.
The company noted that the growth in grocery and health and wellness sales outpaced general merchandise, limiting the margin benefits from higher-margin areas like advertising and membership income. To support traffic and unit growth, Walmart is emphasizing value pricing and rollbacks in grocery categories.
Despite the challenges, there were positive developments in discretionary categories. Fashion and hardlines showed relative strength, and marketplace categories such as fashion, home decor, and cook-and-dine recorded robust growth. Additionally, private-brand penetration improved during the period.
However, the overarching issue remains. Although Walmart’s e-commerce improvements, advertising growth, and operational discipline are enhancing profitability, category mix continues to be a significant margin headwind. Without a meaningful acceleration in discretionary categories, growth driven by staples may continue to limit margin expansion.
Walmart’s shares have rallied 34.8% over the past year, compared to the industry growth of 32.1%. Shares of Costco have dipped 0.7%, while Target has gained 23.9% during this period.
